The government has rolled back its controversial ‘Take and Pay’ provision for electricity produced from Run-of-River (RoR) hydropower projects in the upcoming fiscal budget 2083/84. Prime Minister K.P. Sharma Oli and Finance Minister Bishnu Prasad Paudel addressed the issue in the House of Representatives on Tuesday.
Why Was ‘Take and Pay’ Removed?
During the budget discussion, opposition lawmakers Amanlal Modi and Ganga Karki from the CPN (Maoist Centre) questioned the government’s decision to withdraw the policy.
Prime Minister Oli responded bluntly:
“It was introduced with good intent, but there were concerns it might do more harm than good—so it was removed.”
Finance Minister Paudel gave a more technical justification. He mentioned that only 1,500 MW of capacity remains available under existing power purchase agreements (PPAs) for Run-of-River projects until 2035, according to Nepal’s energy development roadmap.
Energy Producers Strongly Opposed It
After the budget’s announcement, hydropower producers criticized the ‘Take and Pay’ policy and even threatened protests. Their key concern: without guaranteed power purchase, banks wouldn’t finance such projects, and investors would shy away due to uncertain returns.
What Does ‘Take and Pay’ Mean?
Under the ‘Take and Pay’ model, the Nepal Electricity Authority (NEA) would only purchase electricity if needed—there’s no obligation to buy all generated power. This model differs from the current ‘Take or Pay’ system, where the NEA is required to purchase all electricity produced after a hydropower plant becomes operational.
Industry Fears: Billions in Investment at Risk
Energy entrepreneurs warned that if the policy wasn’t reversed, it would put over Rs. 66 billion in investment at risk. Additionally, it would derail the target of generating 28,500 MW of power in the next 10 years, as outlined in the Energy Development Roadmap 2081.
Political Pressure Led to Policy Reversal
Even the ruling coalition partner, Nepali Congress, advised the Finance Ministry to scrap the provision. Eventually, the government amended the budget and withdrew the ‘Take and Pay’ clause to prevent a backlash from the private sector and maintain energy investment momentum.
